formation of apan legal entity in hong kong p t ho apan council meeting 25 january 2008

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Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

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Page 1: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Formation of APAN Legal Entityin Hong Kong

P T HoAPAN Council Meeting25 January 2008

Page 2: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Proposed Option

• APAN incorporated and registered as a Public Limited Company by Guarantee in Hong Kong

• Under Companies Ordinance (Chapter 32 of Laws of Hong Kong)

• Obtain a Business Registration Certificate from HKSAR Business Registration Office

Page 3: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Hong Kong is a Good Choice

Hong Kong’s reputation in terms of Rule of law Freedom & Equality Openness Corruption-free Efficiency Low tax rate Currency peg US$1 = HK$7.8

Page 4: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Limited Company by Guarantee

• Registered office MUST be situated in Hong Kong. It is the legal address for notices and proceedings and can be different from the business office.

• Any legal person can be a member.• The liability of members is limited. • When the company has to be wound up,

each member will need to contribute an amount for payment of the debts, liabilities and other expenses and charges of winding up, say HK$100 (US$13).

Page 5: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Limited Company by Guarantee (Cont.)• At least 2 directors in the Board.• All directors should be individuals, i.e. no

corporate director.• No restrictions on the nationality, domicile and

residences of the members and directors. • (Company) Secretary

– if an individual, should ordinarily reside in Hong Kong;

– if corporate secretary, its registered office or place of business should be in Hong Kong.

• A director can be a member and a secretary at the same time.

Page 6: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Governance Hierarchy

• The (Annual General Meeting) AGM is the highest body of a company.

• AGM must be held at least once a year and must not be held more than 15 months since the last AGM.

• The executive body of a company is its board of directors.• The Board is responsible for the daily running of the company

and implementing the decisions in the AGM. • The Companies Registry of HKSAR Government has

published Non-statutory Guidelines on Directors’ Duties to outline the general principles for a director in the performance of his functions and exercise of his powers. (http://www.cr.gov.hk/en/publications/docs/director_guide_e.pdf)

• The company secretary of a Company is responsible to ensure compliance with ongoing legal returns, accounts, audit and other requirements.

Page 7: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Governance Hierarchy

• Basic Organisational Structure

AGM (Members’ Meeting)

Board of Directors(Council Meeting)

Committees Working Groups Secretariat & Offices

Company Secretary Auditors

Page 8: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Incorporation ProceduresAPAN can engage a legal adviser to help in the process:

1. Choose a name for the company, can be in English, in Chinese or both.

2. Designate an official registered address situated in Hong Kong for registration.

3. Decide the number of members proposed to be registered.

4. Designate founding members and directors (at least 2).

5. Appoint a company secretary to ensure compliance with ongoing legal returns, accounts, audit and other requirements.

6. Prepare the Memorandum and Articles of Association (M&A) of the company, specifying the objects of the Company and the number of members proposed to be registered (point 2 above).

Page 9: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Incorporation Procedures (cont.)7. Submit necessary paperwork and fee to the Registrar of

Companies:a. A copy of Memorandum and Articles of Association of the company

signed by subscriber(s) (at least 1 subscriber) b. “Statement of Compliance on Incorporation of a Company”

8. Collect the Certificate of Incorporation (normally issued in about 3 weeks after the date of submission)

9. Obtain a Business Registration Certificate from the Business Registration Office within a month in order to engage in the company’s activities.

10. Open a business account with a bank.

11. Commence operation and prepare financial statements for audit by an independent auditor annually in accordance with HK Financial Reporting Standards issued by the HK Institute of Certified Public Accountants and the HK Companies Ordinance.

12. Submit annual returns to the Companies Registry each year.

Page 10: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Set-up Cost and Annual FeeSet-up Stage Estimated Cost US Dollar Equivalent

Incorporation & Registration fee• 25 or less members• >25 to 100 members• every 50 members from 101’s

Maximum

HK$170 HK$340 HK$20

HK$1,025

US$20 US$40 US$2.6

US$132

Legal service fee* HK$30,000-50,000 US$ 3,800-6,400

Business Registration Certificate HK$2,600 US$340

Annual Return registration fee HK$105 US$14

Annual Recurring Fee Estimated Cost US Dollar Equivalent

Annual Return registration fee HK$105 US$14

Business Registration Certificate HK$2,600 US$340

Audit fee* HK$15,000-30,000 US$2,000-$4,000

Corporate Company Secretary fee HK$10,000-15,000 US$1,300-$2,000

* Fee can be reduced if honorary legal adviser and auditor can be appointed.

A total set-up fee at the level of about US$2,000-3,000 and annual fee at the level of about US$1,800-2,500 can be explored.

Page 11: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Time-line

Processes Time needed

Confirm company name, registered address, no. of members, founding members and board directors

Start

Engage (honorary) legal adviser 2 to 4 weeksAppoint (honorary) Company Secretary

Prepare M & A and Form NC1A for submission 2 weeks

Collect Certificate of Incorporation 3 weeks

Apply Business Registration Certificate 2 weeks

Estimated time needed for the process: 8 – 10 weeks

Page 12: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Taxation

• Simple and low tax rate– Only income and profits derived directly from Hong Kong are

subject to tax.– Current corporate profits tax rate is 17.5%. – No tax on capital gains, dividends or interest.

• Tax Exemption– a “non-profit-making” company limited by guarantee may still

apply to the Chief Executive of HKSAR for tax exemption under Section 87 of the Inland Revenue Ordinance

– Basic requirement is that all members, board or council members are not entitled to any remuneration or compensation for services rendered to the organization.

– A legal or accountancy firm can be engaged to provide consultation and processing service.

Page 13: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

For Discussion, if Decided to Go Forward• Company Name (what)• Registered address (where)• No. of members to registered (how many)• Engagement of legal advisor (how much)• Appointment of Secretary (who)• Founding Members (who)• Board directors (who)• Subscribers (who)• New M & A (what: review

APAN by-laws)

Page 14: Formation of APAN Legal Entity in Hong Kong P T Ho APAN Council Meeting 25 January 2008

Thank you !